Chapter 12 bankruptcy is a unique bankruptcy code that applies to only family farmers and family fishermen. It was introduced temporarily in 1986 before being finalized in 2005. Similar to Chapter 13 bankruptcy, Chapter 12 allows farmers and fishermen the option to consolidate their debts and pay them off over a three- to five-year period while retaining most if not all of their assets.

Chapter 12 bankruptcy filings for farmers reached an eight-year high in 2019, peaking at 595, before the Coronavirus Aid, Relief and Economic Security (CARES) Act in 2020 offered agricultural relief payments that dropped the filings a bit to 552.

If you live in Fayetteville, Fort Smith, or the Arkansas River Valley area, and financial circumstances are forcing you to consider Chapter 12 bankruptcy, rely on the bankruptcy attorneys at the Bond Law Office to advise and guide you. We have been helping people facing financial difficulties for the past three decades and can definitely help you if you qualify for Chapter 12.

How Chapter 12 Bankruptcy Works

Chapter 12 provides relief for “family farmers” and “family fishermen” with “regular annual income” (even if it’s seasonal) who are facing financial difficulties. It allows filers to propose a repayment plan to cover their debts to the best of their ability. The code envisions a three-year repayment period, which can be extended by the court to five years.

Filing a Chapter 12 Bankruptcy Petition

What separates Chapter 12 bankruptcy from Chapter 13 bankruptcy, which also offers a repayment program, are the debt limits. Total debt — secured and unsecured — for family farmers cannot exceed $4,153,150. For fishermen, the total debt cannot exceed $1,924,550. Excluding debt for their homes, farmers’ debt must be 50 percent or more related to farming, and for fishermen, the debt must be 80 percent or more related to fishing.

The chapter 12 filing petition must include information on:

  • All creditors and amounts owed them

  • The source, amount, and frequency of the debtor’s income

  • A list of the debtor’s property

  • A detailed list of all the debtor’s living and farming/fishing expenses



The Automatic Stay

After filing for Chapter 12, the debtor is given what is known as an “automatic stay,” which halts all creditor efforts to collect debts owed to them and also places a stop on foreclosure or repossession efforts — at least temporarily. The appointed bankruptcy trustee will, within 21 to 35 days after the petition is filed, schedule a meeting of creditors, which the debtor must attend

Creating a Repayment Plan

The debtor has 90 days from the date of filing to propose a repayment plan. The plan must allocate all “disposable income” — which is essentially any money left after paying for the basic necessities of living and the cost of ongoing business operations — to pay back creditors. The plan must ensure creditors receive at least as much as they would under a Chapter 7 liquidation plan.

Scheduling a Confirmation Hearing

After the proposal is submitted, the bankruptcy trustee will review it and all supporting documents, and make a recommendation to the bankruptcy court on whether to accept it or seek revisions. The court is required to hold a confirmation hearing within 45 days after the proposal is submitted. At that time, if the proposal is “confirmed” (accepted), the debtor can begin making the proposed monthly payments to the trustee, who will disburse the funds to creditors.

The debtor will be discharged from bankruptcy once the repayment plan is completed successfully, but it is important to note that certain debts cannot be forgiven under bankruptcy. This includes most student loans, taxes and fines owed to the government, and child and spousal support payments.

Qualifying for Chapter 12

Though Chapter 12 is earmarked for the “family farmer” and the “family fisherman,” if you own an operation that is run as a partnership or corporation, it may still qualify for the code. For a partnership or corporation to qualify, more than half of the stock or equity must be owned by one family, or by one family and its relatives. The stock cannot be publicly traded.

In addition to the debt limitations mentioned above, those filing for Chapter 12 bankruptcy must receive at least 50 percent of their income from their farming or fishing operations. A husband and wife can file jointly or as an individual, but if it’s an individual filing, the spouse’s income must be submitted as part of the petition.

As with all bankruptcy filings, the debtor must attend a certified credit counseling course prior to filing. Also, if the petitioner has been dismissed from a bankruptcy filing within the past 180 days, he or she cannot file again.


With over 30 years of experience helping clients with bankruptcy filings, our legal team at the Bond Law Office can help you navigate the entire Chapter 12 bankruptcy process. We can handle all the details while you focus on operating your business and working toward the fresh financial start that you deserve. If you’re considering bankruptcy, call the Bond Law Office today for a free consultation. We proudly serve individuals and families from Fayetteville, Fort Smith, and the Arkansas River Valley region.